|ASIA'S EXPORTERS STRUGGLE TO COPE WITH A CHANGING GLOBAL ECONOMY|
Aruba, June 22, 2015 - In the good old decades, many Asian governments could stick to a simple economic strategy - ramp up exports, and reap solid growth rates.
Now, export-led growth no longer serves the region well and Asia is struggling to overhaul that economic model as it waits for world trade to recover.
And the rebound "is going to be capped", says HSBC economist Fred Neumann, because of changes in the world economy, including how American consumers are "much more frugal" than a decade ago. Asian exports to the United States have risen this year, but Neumann says such growth now is more driven by investment in software development and shale-oil drilling than by activity that pulls in imports. Stalled global trade talks and the shrinkage of manufacturing supply chains that stretch from China, the world's workshop, are making policymakers from Bangkok to Seoul consider new models as exports may never again grow rapidly as in the 2000s. "The global trade pattern has changed," Paiboon Kittisrikangwan, a deputy governor at Thailand's central bank, told Reuters last week. The patchy recovery in advanced economies isn't producing the same import demand as before, he said.
South Korean Finance Minister Choi Kyung-hwan has called for a "strategic change" by exporters to target Chinese consumers rather than factories. Indonesian Trade Minister Rachmat Gobel, pressed on what he's doing to boost exports, says he will seek more access for local goods to Western markets.
MISSING A PICK-UP
So far this year, exports from East Asia - from Southeast Asia across to Japan - have fallen an average of around 5 percent in dollar terms. Poor performers include Indonesian coal, Malaysian palm oil, Singapore pharmaceuticals and Korean cars.
"Things are not looking up," said Neumann of HSBC, citing persistently weak export orders and purchasing managers' indexes. "They all point towards no pick-up." Economists had hoped temporary factors such as Lunar New Year and U.S. winter weather might explain weakness. But Dan Martin at Capital Economics said these cannot explain the still-weak numbers, which are "something to worry about more than we did before".
Some of the weakness reflects strength of the dollar, which means earnings booked in local currencies are worth less when reported in the U.S. currency. However, concern is rising that rather than another cyclical slowdown from which demand will bounce back, Asian exporters face something structural - and there will be no return to strong growth.